From across America, announcement last summer of a new half-point unfavorable market refinancing fee sparked outrage to build reserves for pandemic-related losses .
On a $ 500,000 refinance, that would cost you either an additional $ 2,500 or about $ 33 more per monthly mortgage payment.
According to the announcement by the director of the Federal Housing Finance Agency, Mark Calabria (regulator and curator of Fannie Mae and Freddie Mac), the agency predicted that it would need at least $ 6 billion to cover projected loan losses. This included $ 4 billion for planned forbearance defaults, $ 1 billion in foreclosure moratorium losses and $ 1 billion in loan officer compensation and other forbearance spending, according to a press release. of the FHFA of August 25.
Mortgage Bankers Association President and CEO Robert Broeksmit described the action last August as untimely and ill-advised.
Even the White House was upset.
“It only seems to help Fannie and Freddie and not the American consumer,” a senior White House official said in an Aug. 13 statement.
The FHFA delayed but eventually implemented the unfavorable market toll on December 1 for conventional refinances of $ 125,000 or more purchased by Fannie or Freddie.
How do mortgages work?
Pretty good. A February 11 MBA press release indicated a dramatic drop in mortgage delinquencies.
“The 92 basis point drop in the delinquency rate was the largest quarterly drop in MBA survey history dating back to 1979,” said Marina Walsh, vice president of industry analysis for MBA.
According to other data from the MBA, forbearance mortgages fell to 5.29% this week, from 8.55% in June.
On February 11, the Urban Institute published the following blog headline: “The predicted foreclosure wave is unlikely to happen, even among financially vulnerable borrowers.”
“The unfavorable market charges have been delayed long enough. They probably won’t need nearly $ 6 billion, ”said Guy Cecala, CEO and publisher of Inside Mortgage Finance. “It should have been clear that it was not necessary.”
Even Fannie Mae’s own 10-K financial statement at the end of 2020 stated the following, buried on page 110: “We continue to accumulate interest income on the vast majority of our forborne single family loans. because we have determined that the interest on these loans is reasonably insured.
This is the code for we do not forgive payment deferrals. We do not forgive accrued interest. We are going to put them on the back of the mortgage. There is so much equity in a home that somehow we’re going to get our own.
F and F funded about 1.2 million unfavorable qualified refinancing mortgages in the market, totaling $ 350 billion from Dec. 1 to Jan. 31, according to Inside Mortgage Finance. At half a point in fees, that’s $ 1.75 billion in unfavorable market fees collected in the first 60 days.
Can you say jackpot?
The Federal Housing Administration has never charged any type of unfavorable market refinance fee for the FHA for generally financially weaker borrowers with down payments as low as 3.5%. The Department of Veterans Affairs also did not, with VA borrowers, typically set zero.
Assuming a 12-month mortgage forbearance, only 8.8% of Fannie and Freddie borrowers would have less than 10% of home equity, compared to 19.3% for FHA borrowers and 26.4% for VA borrowers, according to Black Knight.
What exactly did Fan and Fred do with this mother lode? Neither responded to multiple requests.
There were plenty of headlines from a Google search indicating the private sector is easing its loan loss reserves. Bank of America’s mortgage loss reserves stood at $ 457 million in the third quarter and just $ 2 million higher in the fourth quarter, at $ 459 million, according to bank spokesperson Bill Halldin. of dollars.
And the boss of F and F? Will Director Calabria stop charging mortgage borrowers the half point toll?
FHFA radio silence so far.
“Will (government sponsored companies) reimburse borrowers?” Of course not, ”said Cecala. “If they had to pay him back, they would be much more careful.”
Freddie Mac Rate News: The 30-year fixed rate averaged 2.81%, jumping 8 basis points (its highest since mid-November) from last week. The 15-year fixed rate averaged 2.21%, up 2 basis points from last week.
The Mortgage Bankers Association reported a 5.1% drop in mortgage applications from the previous week.
At the end of the line : Assuming a borrower gets the 30-year average fixed rate on a compliant loan of $ 548,250, last year’s payment was $ 203 more than this week’s payment of $ 2,256.
What I see: Locally, well-qualified borrowers can get the following fixed rate mortgages with a cost of 1 point: 30-year FHA at 2.25%, 15-year conventional at 2%, 30-year conventional at 2.625% , a 15- a conventional one-year high balance ($ 548,251 to $ 822,375) at 2.125%, a 30-year conventional high balance at 2.625% and a 30-year jumbo set at 3.25%.
Eye-catching loan of the week: A fixed rate over 30 years at 2.375% with 2 cost points.